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Test Achats: differential pricing of insurance policies for men and women at an end?

We are writing to update you on the Test Achats case, which might be of interest to you and your firm.

Test Achats case

The European Court of Justice (ECJ) has finally announced that it will deliver judgment in the Test Achats case on 1 March 2011. This case challenges the legality of an European Directive which permits insurers to use gender as a risk factor when setting premiums and benefits under policies.

Insurers fought hard for this derogation; it now seems to be teetering on the brink. The Advocate General’s opinion (which was issued in September 2010) concluded that Article 5 (2) of the Gender Directive (2004/113/EC) - which permits insurers to charge different premiums and to provide different levels of benefit to men and women provided that sex is a “determining factor” in the assessment of risk – was incompatible with the principle of equal treatment under EU law and hence was unlawful. If the ECJ in turn follows the Advocate General’s opinion in making its final judgment, UK insurers would no longer be allowed to use differential pricing of insurance policies for men and women in comparable situations. That would constitute a sea-change for insurance firms – especially those which deal with products such as term life insurance, critical illness insurance, annuity products and motor insurance.

Whilst the Advocate General has suggested a three-year transition period for adjusting to the new legal framework conditions and adapting insurance products should her opinion be upheld, the FSA has now indicated in a recent statement that firms are expected to have plans in place to react to the ECJ judgment next month.

Once the ECJ judgment has been delivered, we will provide an assessment of the judgment and its implications. Watch this space.